Whatever your motivations for remortgaging, we are on hand to help you take the next step on the property ladder.
What is remortgaging and why would I remortgage?
The remortgaging process involves moving your mortgage to a new lender / provider, whilst staying in the same property.
There are many different motivations behind wanting to remortgage:
- Your current deal is about to expire
If your current mortgage deal has come to, or is close to coming to an end, you’ll be moved to the lender’s Standard Variable Rate, which tends to be higher and lead to more expensive monthly repayments. Remortgaging can help to move your mortgage to a lower interest rate
- You want the flexibility to overpay without penalties
If your current provider has excessive fees or penalties for over / early payments, it could be time to consider moving to a lender with more flexible terms.
- You are currently paying a high interest rate
For variable rate mortgages, a rise in the Bank of England base rate will lead to an increase in your monthly repayment. By remortgaging, you could secure a more competitive interest rate and lower your monthly repayment.
- Your property has increased in value
Your loan-to-value ratio may have lowered if your property has risen in value, which could qualify you for lower interest rates and therefore lower monthly repayments.
- You have savings you can use to offset the debt
If you have recently come into a large lump sum, whether it be a bonus, inheritance or savings, you can use this money to offset against your mortgage debt, helping to lower the interest rate that you’ll be paying.
- Equity Release
Common when wanting to pay for home improvements or other large purchases / debts, by remortgaging you can release equity from your property to secure a lump sum of cash
If, for whatever reason, your mortgage is no longer suitable for you, then remortgaging could be right for you.
How should you prepare for a remortgage?
The remortgaging process typically does not take as long as applying for your first mortgage, however it typically can still take up to 8 weeks after you apply. By speaking with a qualified mortgage advisor, you can expect to receive advice as to whether remortgaging is a sensible choice for you.
Before starting the remortgaging process, we recommend thinking about the following five key questions:
- 1) What charges will there be to leave your current mortgage?
Whether it be an exit fee or an early repayment charge, some mortgages will include charges for leaving your agreement early. If your current mortgage deal hasn’t ended, these charges could total thousands of pounds so it is important to check the terms and conditions from your current lender.
- 2) What are you hoping to achieve from a new mortgage?
There are many motivations for remortgaging, so it is important to have a clear goal in mind. You should think about what you need from your mortgage now, as well how your needs might change in the future.
- 3) What is your credit score?
A new lender will check your credit scores with credit reference agencies, so ensure that your credit score is in good shape and has all of the correct information.
- 4) What can you afford to borrow?
Try our mortgage calculator or come and speak with us to see how much you could borrow and to receive an estimate of your monthly payments. It is worth seeing the difference in repayments amount when interest rates change, to see how this would potentially affect your finances.
- 5) Explore the range of remortgage deals available
Once you are happy with all of the above, start to shop around for the best remortgage deals available. We are not tied to any specific lender so we can make sure that we help you to select the right remortgage deal. Call us for an initial, free of charge consultation. There is no obligation to use our services and you can meet in one of our offices in Horsham and Southwater, or arrange a phone based appointment.
How does the remortgaging process work?
Once you have decided that remortgaging is right for you and your financial situation, understanding the process involved in remortgaging is key. Here are the common steps you’ll need to take when remortgaging:
Book a no-obligation appointment
Discussing your options with a mortgage advisor will help to identify the best course of action for you and your finances. There are a myriad of options available to you, and often there are costs and penalties associated with changing your mortgage too often, so it is best to have the peace of mind knowing you are being well advised.
Complete an Agreement in Principle
An Agreement in Principle (AiP) is the best way to find out if and how much a lender is willing to lend to you. By entering a few key details, you will get a much clearer understanding of the options available to you. At this stage, you will not need to choose a specific remortgage deal, but it also isn’t a guarantee you will be approved for a remortgage.
Calculate all of the associated costs
Whilst you might be able to remortgage to a better deal, there are many other associated costs that should be considered to ensure that you will be better off. These include but are not limited to:
- Arrangement fee - the charge to set up a new mortgage
- Valuation fee - used by lenders to confirm the value of your property
- Solicitor’s fee - to manage the transfer of the mortgage you will need to use a solicitor
- Early exit / repayment fees - some lenders will have penalties and fees in place
Apply for your new mortgage
To make sure the process is as smooth as possible, ensure you have all of the necessary documents and paperwork, especially those proving what you earn and for any other debt, loan or credit commitments.
Complete your remortgage
The final few stages of a remortgage are very similar to when buying a new property. Once the lender has carried out a credit check and has had the property valued, if all is approved then a solicitor or conveyancer will handle the transfer of your mortgage.
How can you ensure you get the best remortgage deal?
The primary purpose behind remortgaging is to save money by ensuring you are on the best deal possible. There are many different factors that come into play, including your own personal financial circumstances.
When shouldn’t you remortgage?
Whilst remortgaging might sound appealing, it isn’t always the best course of action for you or your property. Our team of experts will always offer bespoke advice to help you decide, but the common factors that could mean remortgaging isn’t the right move for you right now include:
- Your current lender has a high early repayment charge
Whilst another deal might look appealing, if your current lender will charge you extortionate fees to change to a new deal, it might not make financial sense to make the change. The sums can often be very complicated and difficult, so our team is on hand to help you ensure you are using the right information to make your decision.
- The remaining mortgage debt is very low
Once your remaining loan falls below a certain level, the potential interest rate savings might not outweigh the costs of switching providers. The smaller your remaining loan, the more painful any fees would be, to the extent that it might be more beneficial to remain on your current deal.
- Your home has fallen in value
Just as an increase in property value can improve your LTV, a fall in your property value will increase the loan to value ratio, often leading to less attractive interest rates. In extreme cases, if your property has fallen dramatically in value, you could end up in negative equity, where the value of your property is less than the amount owed.
- Your circumstances and income have changed
Lenders have to see proof and evidence of your income, so if there is a change in circumstances such as a drop in income or a change in employment status, then you might not have the same eligibility as you did when you first applied, which might affect the deals available to you.
- You have very little equity
The larger the proportion you need to borrow, the less attractive the interest rates available to you. If you only have a small proportion of equity when you try to remortgage, you may not be eligible for any better rates.
- Your credit score has dropped since you first applied
Lenders are obliged to analyse your financial situation in great detail, and they want to find a clean track record of handling debt well. If you have recently missed a repayment, whether it be a mortgage, credit card, utility bill, car or even mobile phone, then your credit score might not be as strong as it once was.
All of these factors are very individual specific, they will affect everyone differently. If you are looking to remortgage but believe you fall into any of these categories, then we are here to help with professional and comprehensive advice.
Start your Remortgaging process with us
As we are not tied to any specific lender, we can make sure that we help you to select the right mortgage for you and your property. Call us for an initial, free of charge consultation. There is no obligation to use our services and you can meet in one of our offices in Horsham and Southwater, or arrange a phone based appointment.
YOUR HOME MAY BE REPOSSESSED IF YOU DON’T KEEP UP REPAYMENTS ON YOUR MORTGAGE OR OTHER DEBT SECURED ON IT
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